Government Operations Committee on Dec. 14th, 2010

[Geoff Regan, Liberal, Halifax West, NS]

Has the RCMP contacted you to ask for your advice, ask for information? Are you doing any investigation of this matter?

[Oriana Trombetti]

No, they have not contacted us, and we have not been tasked with doing any investigation of this matter.

[Geoff Regan, Liberal, Halifax West, NS]

Do you have the intention to investigate this? If so, why? If not, why not?

[Oriana Trombetti]

I have specific responsibilities, as I indicated, as the deputy procurement ombudsman. I do not have the authority at the present time under the legislation to initiate a practice review of this matter, or an investigation of this matter.

That could be done upon the appointment of a new procurement ombudsman, depending on whether that individual would like to investigate this matter or not. It is the procurement ombudsman who has the authority to initiate a review.

[Geoff Regan, Liberal, Halifax West, NS]

Okay. That's doesn't leave us a whole lot, Mr. Chair.

I think I'll go back to Mr. Hollander and ask him a question. In the case where we have officials insisting to us that there was no influence, they didn't talk to Mr. Varin, who is the alleged unregistered lobbyist, how do we investigate this? How do we uncover whether there's wrongdoing or not?

[Stephen Hollander]

The usual way we would do this is to start off at the latest phase, which in this case is the contract was in effect and the work was being done, and work our way back through the documentation to find out where it effectively went off the rails.

Now, in this case I understand, and please correct me if I'm wrong, that the successful bid was the lowest of the ones submitted and that it was so low that people were scratching their heads and wondering how this could be.

Is this correct?

[Geoff Regan, Liberal, Halifax West, NS]

My understanding is that they were concerned about the number on the bid. It was $2 million below other bids, and one wonders how that happened.

[An hon. member]

It wasn't $2 million—

[The Chair, Liberal, John McKay]

We're getting into a bit of a debate between members, and Mr. Regan's time is up.

Maybe there will be an opportunity to come back on this at another point.

Mr. Lemay, you have eight minutes, please.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chairman.

Mr. Hollander, thank you for being with us so early this morning, Vancouver time. It is not your fault, but I would have greatly appreciated hearing you at the beginning of this inquiry. Indeed, the elements that you are bringing forward are very interesting and would probably have guided our questions to the various witnesses differently.

On page 5 of your presentation, you talk about the "Development of statements of work and specifications". Do you believe that there could be room for various abuses if the restrictions set out are so specific to the contract that, in the end, there could be only be one bidder?

I am trying to understand, because witnesses told us that the renovation work for West Block was so specific, complex and particular that the number of potential bidders would be limited. I would like you to explain to me the difference between this point: "Defining specs/SOW to fit the products and capabilities of a single contractor ("Tailoring")", and what we were told by the architects, with regard to the difficulty, the complexity, etc.

I would like to hear your comments in this regard.

[Stephen Hollander]

It certainly is possible for a construction project to be so intricate and so involved that only a certain number of companies would have the resources—human and otherwise—to undertake it. This is one of the reasons you have a pre-qualification stage.

But It would be possible--I understand that it didn't happen in this case--for an employee or agent of the purchaser to define the requirements so specifically and with the objective in mind that only one company would be able to do it. For instance, I have seen situations in the case of the purchase of a product—an electronic product—where the specifications were essentially word-for-word the specification sheet of the manufacturer. In situations like that it becomes quite obvious that the specifications were tailored to direct the work to that manufacturer.

In the instant case, I believe there were in fact a number of qualified bidders, and the work was awarded to the lowest responsible bidder. Again, I could be wrong on this, but this is what I get from reading the newspapers, which of course are never wrong about anything.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

For example, could the person giving the orders, the architect responsible for the job, restrict the scope of the project to such an extent that there would only be one bidder capable of doing the work, as you were mentioning earlier? If that contractor is the only one capable of doing the work, then he or she could set conditions, impose specifications or money issues, to such an extent that there would be no way of avoiding fraud.

[Stephen Hollander]

Certainly if there is only one possible source of supply, then that supplier is in a position to drive a hard bargain. It would presumably be fraudulent if the specifications need not have been that rigorous. Again, it becomes to a certain extent a matter of supply and demand.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

I read your document very carefully, I read your notes and I listened to you. In your opinion, who should be responsible for ensuring the quality of the contractors for a job such as the renovation of West Block, which is a very complex project, as we have been told? Should there be preselection? If so, who should do this? How should this preselection be carried out in order to avoid abuse and possible attempts at corruption?

[Stephen Hollander]

Presumably the agency responsible for letting the contract, the agency responsible for procurement--which is to say, identifying potential sources of supply--would have a database of the various suppliers and would have their capabilities noted in terms of equipment, personnel, past work that had been done, and other indicators that would indicate their capability to do work of various types and complexity. When it came to qualifying people to submit tenders, the qualified people would be selected on that basis.

Again, before the request for proposals or the call for tenders went out I would recommend that there be a certain due diligence done to make sure you weren't going to be buying a bag of snakes.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Hollander.

I will now move on to the representative from the Office of the Procurement Ombudsman. After having heard Mr. Hollander, do you believe that you have the capability to oversee, in accordance with the specifications Mr. Hollander has just mentioned, the work that the rehabilitation of the building could entail: the awarding of contracts, the supervision of the contracts awarded? Do you believe you have the necessary capabilities, were a complaint to be tabled with your office in this regard?

[Oriana Trombetti]

Yes, we do. We have an interesting mandate. Part of our mandate is to review the practices and processes and tools and procedures that government departments use to procure goods and services, including construction services, so we can certainly undertake a practice review in this area. More particularly, we can undertake a practice review that looks at how departments develop specifications.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Thank you.

[The Chair, Liberal, John McKay]

Thank you, Mr. Lemay and Ms. Trombetti.

Mr. Calkins, for eight minutes, please.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Thank you very much, Mr. Chair.

Mr. Hollander, Madame Trombetti, Mr. Morse, thank you for joining us here this morning.

I'm going to begin my line of questioning with Mr. Hollander. Thank you for getting up so early and joining us by video conference and taking time away from your vacation. It sounds to me almost as if you're a member of Parliament, with that kind of schedule.

I'm going to ask you some fairly direct questions. I have a bit of experience, particularly from the project management side of developing software applications, so I know all about the change management process, and you identified that as one of the areas where corruption and collusion can certainly take place.

You've given us some pretty astounding information here in the slides about where this could go. I'm going to ask you, from an overall perspective, the distance between being at the top, such as a senior-level bureaucrat—and I'm focusing mostly on the Government of Canada, because that's what my role here as parliamentarian is. I'm assuming you look to both government and private sector procurement when you do your studies. Is that right?

[Stephen Hollander]

That's correct, sir.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Looking at it from a government perspective, when I was in charge of procurement, for example, when I worked for the Province of Alberta, for anything over a couple of hundred dollars, at my level of decision-making, I had to get at least three different quotes in order to purchase something. Taking a look at multi-million-dollar projects, that's quite complicated, and when we take a look at defence, that's a whole other ball of wax altogether.

The degree of separation between a senior manager, who we often talk to here as parliamentarians, and all of the layers down inside the bureaucracy of a department you say opens up a whole opportunity for corruption and collusion to happen. I'm going to ask you, do you think the penalties we have in Canada for fraud and collusion are strong enough to act as a deterrent?

[Stephen Hollander]

Here, once again, this is a bit above my pay grade, because criminology isn't my field. I would say that if there were a decent chance that the people who did this sort of thing would get caught, and if there were a decent chance that if caught they would be convicted and sentenced, the deterrent factor should be fairly significant. I would think that what has to be done, really, is what some of my colleagues call “raising the pavement”. Let me explain what I mean by that.

If we had been having coffee and we decided to take a walk down Rideau Street and I asked you to walk right along the edge of the curb, heel to toe, you could probably do that fairly briskly. If, instead of walking along the edge of the curb, you were walking along the edge of a platform 20 feet high, you'd probably walk more deliberately and more carefully. It's the same skill set, if you see what I mean, and the same sense of balance, but the consequences of failure would be considerably greater. So if we could say confidently that yes, we have these penalties in place and people who do wrong will suffer these penalties, my own view, for what it's worth, is that this should be a pretty good deterrent.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

In your studies, do you think the Government of Canada or any of the agencies that you've studied, through the experiences that you've had, have significant or relevant enough forensic investigative authorities or forensic investigative qualifications to detect fraud and collusion?

[Stephen Hollander]

I believe they do to the limited extent that they can, but if we take a look at fraud detection and fraud reporting overall, one of the things we find is that the internal mechanisms aren't really the best ones around and the most effective ones around.

If I could direct your attention to your bundle again—and I hope you don't mind me referring to this repeatedly--we can look at the initial detection of fraud in government agencies in Canada. This is slide number 27, and the source of this information is a booklet that was put out, a report by the Association of Certified Fraud Examiners. It's available in English and French, and I did provide the link to your learned clerk, so I don't know if you have this or not. In any case, if you take a look at the way that fraud is initially detected by government agencies, in 48% of the fraud cases that were investigated, the source of the information was a tip. If you take a look at internal audit, it detected only 28% of these cases in the first instance.

So in my view, the best way of getting a handle on this problem would be not necessarily by beefing up our internal detection mechanisms but by encouraging and promoting the employees of an organization and the employees of vendor organizations to blow the whistle if they have the opportunity, because what we're doing here is availing ourselves of the knowledge of people who are right up front and who know what's going on. My view, as a former public servant, is that people who are in the public service are aware of what's going on. They by and large want to do the best job they can for the people of Canada. They resent it when people cut corners. They resent it when people do wrong. If there were a mechanism available to them to report without getting their own heads cut off, many of them would.